During a workshop about the Texas Power Market, Peter Kelly-Detwiler, principal of the NorthBridge Energy Partners consultancy in Lexington, Massachusetts, pointed out that ERCOT has about 20,000 MW of solar projects in the interconnection queue, which would represent an exponential increase in solar capacity from today’s roughly 1.5 GW.

Utility-scale solar costs have plunged about 86% from 2009 through 2017, Kelly-Detwiler said. “At the same time, conventional generation costs are relatively flat-lined.”

Not long ago, coal-fired generation was considered among the least-expensive resources, but at an average cost of $50 to $65/MWh today, it is second only to peaking gas turbine units, Kelly-Detwiler said.

In contrast, renewable power has costs ranging about $10/MWh, nuclear power costs range from $15 to $20/MWh and natural gas combined-cycle power ranges from $25 to $35/MWh, according to his written presentation.

The increasing efficiency of hydraulic fracturing in exploration and production of natural gas “has been responsible for the decline of coal — it hasn’t been renewables,” Kelly-Detwiler said.

But as solar and wind technologies improve in cost and efficiency, “the playing field continues to tilt in favor of these relatively new technologies,” he said.

SOLAR FORECAST

Solar PV deployment is expected to add more than 10 GW of capacity in 2018 and 2019, and between 13 GW and 14 GW a year from 2020 through 2023, according to a Solar Energy Industries Association-Wood Mackenzie chart included in Kelly-Detwiler’s presentation.

“Texas is going to be a big part of that, based on what we see in the interconnection queue,” Kelly-Detwiler said. “Solar is going to be the next big thing in ERCOT in terms of game changers.” Adding solar in Texas makes sense because it can smooth out the power supply curve that often becomes volatile as wind generation waxes and wanes, Kelly-Detwiler said.

The capacity factor for solar in Texas is about 21.7%, No. 6 among the 50 states, he said. California tops the list with 28.1%, followed by Arizona with 27%, Nevada with 26.7%, New Mexico with 25.8% and Colorado with 22.7%.

But solar power presents challenges as well, especially when behind-the-meter rooftop solar destroys power demand during peak hours but causes a massive increase in demand as the sun sinks in the west.

“The problem is what to do with the surplus,” Kelly-Detwiler said.

Battery storage is an obvious choice, and the technologies are improving, but the conversion of transportation from the internal combustion engine to electric vehicles is likely to provide the tipping point, Kelly-Detwiler said.

ELECTRIC VEHICLES

The People’s Republic of China is massively increasing its investment in clean energy and electric vehicles — with 360,000 electric buses in use today — because they perceive a trend in that direction, Kelly-Detwiler said.

“Meanwhile, we are relaxing our clean energy standards,” Kelly-Detwiler said. “We’ve basically wrapped up the US auto industry and put a bow on it and given it to China. …The good news is they are driving down the cost of everything for us.”

As of September, automakers in the US have cumulatively sold a million electric vehicles, and Bloomberg New Energy Finance projects that 35% of new vehicles sold would be EVs by 2040, Kelly-Detwiler said.

“As those battery costs fall for electric vehicles, we can use them for stationary storage,” he said.

Also, EV batteries become no longer useful once their capacity falls to about 80% of maximum, but they may retain much of their usefulness in a stationary application, so in about 10 years, as EV batteries are replaced, the old ones can become cheap resources for the grid.

When that first wave of old EV batteries comes in, “it’s going to be so dirt cheap that it’s going to fundamentally change” power markets, Kelly-Detwiler said.

Existing renewable assets are already increasingly being retrofitted with energy storage technology, Kelly-Detwiler said, which will only accelerate as the used EV batteries become available.

Regulators at the federal level have decreed that organized markets must adjust their rules so energy storage facilities can participate on an even playing field with generation, but batteries can also play a role at the transmission and distribution level, which is typically regulated at the state and local level.

The Public Utility Commission of Texas has initiated a rulemaking to determine how battery storage should be treated in the state.

Kelly-Detwiler advised against allowing regulators to create rules that limit storage’s participation either as generation or as transmission assets.

“It doesn’t necessarily have to be either-or, because it is both,” Kelly-Detwiler said. “If you can get multiple revenue streams from the same product, that’s all the better.”